In this day and age, there are plenty of investment options available for investors in the market. Two of these include term deposits and fixed deposits. Being two of the most popular investment plans available, it makes sense that investors would be drawn to them.
However, as similar as they may sound, there are quite a few differences between these investment plans. But before we get into the whole term deposits vs fixed deposits debate, we need to first understand what each of the investment plans is actually about and what their features are.
The term deposit investment plan is offered by several financial institutions and banks as well. This is a fixed-period investment option in nature, having a shorter maturity period. This period could range anywhere from 1 week to 5 years. Term deposits do, however, have a minimum investment/deposit requirement, but the returns that they guarantee have fixed interest rates.
To help you further understand what term deposits are, here are some of their main features:
FDs or fixed deposit accounts are accounts that allow investors to invest a lump sum amount for a fixed amount of time with a fixed interest rate. With a lock-in period ranging from one month to 10 years, the interest earned on the deposit amount is determined by this tenure. Even though FDs do provide the benefit of withdrawal before the maturity of the investment, there are penalty charges that are levied.
Here is a list of some of the main features of fixed deposits for you to understand them better.
Here’s to getting down to the nitty-gritty of it. Let us now have a look at the major differences that exist between these two investment plans.
Features | Term Deposits | Fixed Deposits |
Interest Rates | Based on market conditions interest rates can either be fixed or variable in nature | All through the investment tenure, FDs offer fixed interest rates |
Tenure | Minimum-Few weeks Maximum-5 years | Minimum-7 days Maximum - 10 years |
Best for | Short-term investors | Mid and long-term investors |
Penalty on premature withdrawal | Applicable | Applicable |
Flexibility | More flexible | Less flexible |
Now having seen the major differences that exist between these two plans, let’s have a look at their benefits too.
Term Deposits:
Fixed Deposits:
Term deposits and fixed deposits are both excellent investment options for those seeking stable and secure returns. Understanding the basic differences between the two can help you make an informed decision that aligns with your financial goals.
Always compare interest rates, tenure options, and withdrawal terms before making your choice. By carefully evaluating these factors, you can choose the investment option that best suits your needs and helps you achieve your financial objectives.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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